Page 9 - FSUOGM Week 19 2020

FSUOGM COMMENTARY FSUOGM
Central Asian gas producers stung
by Chinese demand losses
China’s slump in demand will have long-term implications for Central Asian gas
CENTRAL ASIA
WHAT:
China has cut shipments of Central Asian gas
this year because of the COVID-19 crisis.
WHY:
Lockdown measures in place earlier this year led to a slowdown in Chinese gas demand growth.
WHAT NEXT:
China’s weaker gas demand and poorer economic performance will result in a further delay at the Line D project.
CENTRAL Asian gas producers Turkmen- istan, Kazakhstan and Uzbekistan will take a hit this year from the slowdown in Chinese gas demand. The loss of export revenues has put additional pressure on the three states’ commodity-based economies, already reeling from the collapse in oil and gas prices and the broader impact of the coronavirus (COVID- 19) pandemic.
Beijing imposed tough travel restrictions and shut down factories earlier this year to combat the spread of COVID-19. The resulting drop in gas consumption led Chinese gas importers to declare force majeure on their supply contracts. China’s customs data shows that the country’s imports via pipeline and in the form of LNG dur- ing January to April were up 1.5% year on year, marking a significant slowdown from the 16.4% growth record in the same period last year.
China has not published a breakdown of its gas imports by their source. However, Kazakh Energy Minister Nurlan Nogayev said in mid- March that PetroChina had declared force majeure on its five-year contract for Kazakh gas. Supplies had fallen 20-25%, he said. Around the
same time Uzbekistan’s national oil company (NOC) Uzbekneftegaz confirmed that it too had received a force majeure notice, and that deliver- ies had dropped by an unspecified amount.
Uzbekistan shipped 7.6bn cubic metres of gas to China last year, while Kazakhstan supplied 7.1 bcm. Turkmenistan, China’s top gas supplier, sent 33.2 bcm. Turkmen authorities have not commented on the situation with gas supplies this year. But it seems unlikely that China would cut imports from Kazakhstan and Uzbekistan without imposing a similar reduction in Turk- men volumes.
Cuts to supplies could be prolonged and possibly deepened, with Uzbekneftegaz CEO Mekhriddin Abdullayev telling Platts last week that the three suppliers had been asked to share a cut.
“China requested a cut, but indicated that any reduction in gas supplies would be carried out proportionally between Turkmenistan, Kazakh- stan and Uzbekistan, he said. “A co-ordinating committee of the three Central Asian countries that supply gas to China is discussing exact vol- umes. A decision has not yet been made.”
Week 19 13•May•2020 w w w . N E W S B A S E . c o m P9